TMI Blog2002 (5) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer is against law and facts of the case." 3. There was search and seizure operation on 13-12-1995 at the residence of the assessee and her husband Shri J.K Beri and thereafter in response to this a show-cause notice was issued under section 158BC(c) on 28-2-1996. The assessee filed her return for the block period from 1st April, 1985 to 13 December, 1995 in Form 2B on 2nd May, 1996 declaring therein the undisclosed income at 'Nil'. As per the return filed in Form 2B, the details of income comprised in the block period is as under: --------------------------------------------------------------------------------- Assessment year Details of total income Details of total of the previous year income of the previous including undisclosed year Returned/ income Assessed --------------------------------------------------------------------------------- 1986-87 Rs. 24,600 Rs. 24,600 1987-88 Rs. 33,620 Rs. 33,620 1988-89 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above agreement, another agreement dated 1-5-1995 between the assessee Smt. Purnima Beri and Shri Vijay Sehgal for sale of his ownership right in the share inherited from his deceased father Sh. D.D. Sehgal for a sum of Rs.7,46,400 was also found. The agreement stipulated that the consideration of Rs.7,46,400 has been paid by cheque by Smt. Purnima Beri to Sh. Vijay Sehgal, 4. At the time of search the assessee was confronted with these. She admitted correctness of signatures on both the agreements. But explained that the price of Rs.1,01,04,000 mentioned in the agreement dated 29-4-1995 was to compensate Shri Vijay Sehgal for transferring the shares to the assessee to enable the Beri Group to have effective control over the affairs of the company M/s. Leader Valves Ltd. whereas in the subsequent agreement dated 1-5-1995 the price paid was mentioned at Rs.200 per share as against Rs.2,000 per share mentioned in the agreement dated 29-4-1995 and the price of Rs.200 per share was approximately the book value of the share against the face value of Rs.100 per share. 5. The Assessing Officer has given in para 5 of the assessment order the brief history relating to the company M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the residence of Shri Yash Pal Mittal from whose custody the two agreements were found and seized alongwith the receipts issued by Shri Vijay Sehgal acknowledging receipt of cheque payment. During the course of assessment proceedings, the assessee explained before the Assessing Officer that the price of Rs.2,000 per share mentioned in the agreement dated 29-4-1995 was a tentative price while price of Rs.200 representing the book value of the share was correct price, and the difference in the two values was on account of compensation which was paid by the assessee to Shri Vijay Sehgal for assuming the effective control by the Beri Group over the affairs of the company M/s Leader Valves Pvt. Ltd. Both S/Sh. Vijay Sehgal and Purnima Beri, the assessee agreed that the total sale consideration was Rs.1,01,04,000 but only an amount of Rs.10,10,400 was paid and the balance was to be paid at the time of search. The Assessing Officer also recorded the statement of Sh. Yesh Pal Mittal as well as Sh. Shital Vij, during the course of assessment proceedings on 14-10-1996, and they resiled from their earlier statements given at the time of search on 13-12-1995 with regard to the payment by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has claimed that some further payment has been made by her after 31-12-1995 in favour of Vijay Sehgal by means of cheques. This has been allegedly done after 31-12-1995 on the basis of mutual understanding. It is also important to note that in his statement recorded at the time of search, the witnesses Shri Yash Pal Mittal gave details of cash payments of Rs.42 lacs made by the assessee to Sh. Vijay Sehgal between 29-4-1995 and 12-12-1995. Subsequently he tried to wriggle out of this statement on the plea that it was based on hearsay. It is important to note that the statement was made at the time of search spontaneously and without any pressure or influence. There appears no reason to doubt the credibility of that statement. After consideration of all the relevant facts the only conclusion we arrive at is that the assessee has made full payment of sale consideration of Rs.1,01,04,000 for purchase of 5052 shares belonging to Sh. Vijay Sehgal. The sale consideration comprises payments by cheques amounting to Rs.10,10,400. The sources thereof stands explained while balance amount of Rs.90,93,600 has been paid in cash, the sources thereof remains unproved and undisclosed. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was to be paid for the transfer of shares including these which are to be inherited by Shri Vijay Sehgal from the Estate of his father late Shri D.D. Sehgal (Deceased) under the Hindu Succession Act. It was pleaded that the total consideration of Rs.1,01,04,000 mentioned in the agreement dated 24-9-1995 was in respect of the entire shareholding of Shri Vijay Sehgal inclusive of the shares which were to be inherited by Shri Vijay Sehgal from the Estate of his father Shri D.D. Sehgal (Deceased). But the question regarding inheritance of those shares was pending adjudication before the Hon'ble Punjab and Haryana High Court at Chandigarh on account of dispute between the legal heirs of Shri D.D. Sehgal (Deceased). It was submitted that under these circumstances, it was difficult to understand as to how the assessee could pay for those shares whose very existence was in doubt at the time of search as the matter with regard to the distribution of the Estate of late Shri D.D. Sehgal which included 29860 Equity Shares held by Shri D.D. Sehgal (Deceased) was in dispute and was pending adjudication with the Punjab and Haryana High Court at Chandigarh. It was pleaded that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that this part of the statement was subsequently resiled by the witness Shri Yash Pal Mittal before the Assessing Officer who again recorded his statement on 14-10-1996 alongwith that of the other witness Shri Sheetal Vij. It was submitted that Shri Yash Pal Mittal and Shri Sheetal Vij are the witnesses of the revenue and the addition is based on their statements recorded at the time of search which was subsequently resiled by them during the course of assessment proceedings before the Assessing Officer and they have given a clarification to the Assessing Officer that the fact of passing of cash amounting to Rs.42 lacs between the parties mentioned by them at the time of recording their statement on 13-12-1995 was not based on their personal knowledge but was on the basis of hearsay and as such they have no knowledge about the passing of any cash between the parties and they were witness only to the cheque payments aggregating to Rs.10,10,400 which was paid by the assessee Smt. Purnima Beri to Shri Vijay Sehgal in the form of three cheques of valuing Rs.1,98,000, Rs.66,000 and Rs.7,46,000. The receipt in relation to which was also seized by the search party from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the Authorised Officer who recorded statements and they have stated that on money ranging from Rs.42 lacs to 60 lacs passed between the assessee Smt. Purnima Beri and Sh. Vijay Sehgal. It was submitted that these witnesses were won by the assessee subsequently and they have resiled from their original statements given to the Authorised Officer on 13-12-1995 for the reasons best known to them. It was submitted that recovery of huge amount of cash and FDRs, etc. from the search of Sh. Vijay Sehgal and their family members also leads credence to the theory of Shri Vijay Sehgal having been in receipt of unaccounted cash from Smt. Purnima Beri and that unaccounted cash was paid by the assessee to Shri Vijay Sehgal. It was submitted that the subsequent payments by cheques by the assessee to Sh. Vijay Sehgal were made and might be equivalent cash taken by the assessee from Shri Vijay Sehgal. Shri Mohinder Singh, learned D.R. accordingly supported the order of the Assessing Officer and submitted that the addition of Rs.90,93,400 was rightly made by the Assessing Officer and should be confirmed. 9. We have considered the rival submissions and have also gone through the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j. No cash has been paid in my presence at any point of time. I stand by my statement which I am giving today. Similarly, in the statement of Shri Shital Vij, recorded by the Assessing Officer on 14-10-1996, the relevant questions and answers are as under:-- Q. 1. Since you are a witness to both the agreements please state as to how much money has been paid by Mrs. Purnima Beri to Sh. Vijay Sehgal in consideration of the purchase of the abovementioned shares of Leader Valves Ltd., Jalandhar. Ans. As far as I know whole, of the payment is to be paid through cheque only. As per my knowledge the payment of Rs.10 lacs has been paid through cheque till 13-12-1995, date of search and certain cheque payments have been made after 13-12-1995 of which I am aware of. No cash payment were made in my presence. I have no knowledge about the same. Q. 2. I am showing you your statement recorded on 13-12-1995 wherein you have confirmed the statement of Sh. Yash Pal Mittal dated 13-12-1995 in which he has stated after consulting you that Mrs. Purnima Beri has paid Rs. 60 lacs till 31-12-1995 which included payments approximately Rs.10 lacs made through cheque which means the balance was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in view the totality of the facts and circumstances of the case, we are of the opinion that the addition of Rs.90,93,600 made by the Assessing Officer is not justified and is directed to be deleted. 10. In the result the appeal of the party is allowed. Per Phool Singh, Judicial Member 11. I have the privilege to go through the order prepared by my learned brother Shri R.K. Bali, Accountant Member and discussed the matter with him but even after that I am not in a position to agree with the findings recorded by the learned brother. Accordingly, I proceed to pass the following order. 12. Before taking up the arguments of respective parties, a belief of the facts involved in the case though the same have been narrated by learned brother in detail. Initially, it was Leader Engg. Works, a partnership firm in existence located at Jalandhar in which S/Shri P.N. Beri, D.D. Sehgal, K.K. Sehgal and Gambhir were partners. It was shown to be a successful venture. Later on, it was converted into a limited company in the name of "Leader Valves Ltd." The original partners became shareholders of the company. However, some years back certain disputes had arisen among the shareholde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnima Beri to Shri Vijay Sehgal in three instalments and even gave out the dates of each payment. He further confirmed from Shri Shital Vij, another witness and stated that in all Rs.60 lacs were passed including amount paid through cheques from Smt. Purnima Beri to Shri Vijay Sehgal. This statement was corroborated by Shri Shital Vij, another witness of the agreement deeds. In the preliminary statement recorded at the time of survey on 13-12-1995, Smt. Pumima Beri admitted her signature on agreement dated 29-4-1995 but stated that the same was signed by her in office in routine manner alongwith other documents and did not confirm the statement given by Shri Yash Pal Mittal to whom she admitted to have met 2-3 times in her life. She could not give out anything about the payment made in respect of those agreement deeds or about the person who actually paid that amount. However, during the assessment proceedings, story took different turn as Shri Yash Pal Mittal resiled from his earlier stand during the statement recorded by the Assessing Officer (hereinafter referred as the Assessing Officer) and mentioned that whatever he stated was hearsay and he had no personal knowledge about an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96-97 while completing the assessment for the block period from the assessment years 1986-87 to 1996-97. It is this addition, which has been challenged by the assessee through this appeal. 13. The learned counsel for the assessee, Shri N.K. Sud, has assailed the addition on so many grounds and those submissions have been given out by my learned brother in para 7 of his order. According to the learned counsel the addition of Rs.90,93,600 is not justified and is based on mere suspicion and conjectures. It was contended further that both the parties viz. Smt. Purnima Beri and Shri Vijay Sehgal admitted to the correctness of the agreements and have given reasons for the difference in value of one share in Leader Valves Ltd. in both two agreements. According to him, the price of Rs.2,000 in the agreement dated 24-9-1997 was tentative price, which includes the amount being paid by the assessee to Shri Vijay Sehgal to compensate him for surrendering his ownership of shares. The other agreement dated 1-5-1995 representing the price, which was to be paid for the transfer of shares of Shri Vijay Sehgal including those inherited by said Shri Vijay Sehgal from the estate of his father Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned D.R. has placed reliance on the order of the Assessing Officer. 16. Before entering into the arguments of the learned counsel, it is to be kept in mind that there was inter se rivalry going on in between the assessee and other shareholders to take over the effective control and management and for that the assessee was also making sincere efforts to enhance the shareholdings to more than 50 per cent. In this context, the assessee entered into the agreement to purchase 1320 equity shares held by Shri Vijay Sehgal in his own name and 3732 equity shares inherited by Shri Vijay Sehgal being 1/8th of 29860 equity shares owned by his father, Shri D.D. Sehgal. It is also undisputed fact that there were two agreements recovered from the house of one Shri Yash Pal Mittal out of which the first agreement dated 29-4-1995 reveals that Shri Vijay Sehgal agreed to sell the above referred to equity shares to assessee @ Rs.2,000 per share and the consideration of Rs.1,01,04,000 was to be paid by 30-12-1995. The other agreement dated 1-5-1995 is in respect of transfer of 3732 shares allegedly inherited by Shri Vijay Sehgal from his father in which value of all shares is Rs.7,46,400 mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beginning as she had not given specific answers to the questions put up by the raiding party at the time of search and even evaded question relating to the payment of the price of equity shares to Shri Vijay Sehgal and it was only during the assessment proceedings that she came to admit that price of equity shares, as mentioned in agreement dated 29-4-1995 was the agreed one and she was supposed to pay Rs.1,01 crores to Shri Vijay Sehgal by the end of 1995. Not coming with clear and specific reply in the very beginning till the assessment proceedings goes to show that the conduct of Smt. Purnima Beri was not above board. 18. There is another peculiar feature of the transaction that there were two agreements executed in between the transferor and transferee and the first was executed on 29-4-1995 and second after the two days. The price of equity share to be paid by Smt. Purnima Beri was Rs.2,000 per share in agreement dated 29-4-1995 but this price was reduced to Rs.200 per share in the second agreement dated 1-5-1995. The explanation of the assessee that value of Rs.2,000 per share given in the first agreement was mentioned as tentative price is not believable nor it was fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid. These instalments were in a gap of 7 to 10 days between these two. As far as I remember, these pay ments were made in the month of June/July. 3. A payment of Rs. ten lacs has been made between the parties on 12-12-1995 i.e., yesterday. Therefore a total of Rs. forty-two lacs in cash has been passed till date between the parties to the documents as per my knowledge. This total amount was paid in addition to three cheques of Rs.1,98,000, Rs.7,46,400 and Rs.66,000. I do not have any knowledge about any other cash payment. In my earlier statement I had deposed that on the date of we enter of document only five to six lacs were passed, but now I remember that it was Rs. seven lacs as stated above. So far as remaining payments are concerned, I can tell after consulting other witness to the document i.e., Mr. Shital Vij. Now, I have made a contract with the other witness to the document Mr. Shital Vij and the total payment including the payment made by cheques as described above is Rs. sixty lacs as on 13-12-1995." Statement of Shri Shital Vij, another witness of these two agreement deeds, were also recorded on that very day and he gave the following answers to the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly this during the statement itself this witness contacted Shri Shital Vij another witness on telephone to enquire the exact amount which changed hands on account of this transaction as he initially stated that transfer of 42 lacs apart from the payment through cheques but later on, he stated this figure to Rs. 60 lacs including the payment through cheques after getting further information from Sh. Shital Vij. This fact alone goes to prove that both these witnesses were fully alive about the transaction going on between the parties as they were said to be the man of confidence and even documents were with them. The parties must be apprising about each and every fact to both of them and whatever version given by Shri Yash Pal Mittal and corroborated by Shri Shital Vij at the time of search should be taken as true. Not only this, Shri Yash Paul Mittal in his statement reproduced above have given out the details how the payments have been made and even specifically dates and months of payment of cash made by Smt. Purnima Beri to Shri Vijay Sehgal were mentioned. Unless and until these witnesses were not knowing full facts question of giving minute details about the payments were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd and most of these amounts were treated as unexplained amounts of investment made by Shri Vijay Sehgal during the period after the date of agreement and before search. The Assessing Officer rightly observed that there is nexus in between the payment of Rs. 50 lacs approximately by Smt. Purnima Beri in cash to Shri Vijay Sehgal and recovery of cash as well as unexplained investment by Shri Vijay Sehgal as noted above. We confirm that finding of Assessing Officer, which is apparent on record. Apparently it is clear that whatever amount was received by Shri Vijay Sehgal was invested in FDRs and other transactions noted above and some of the cash was found but fact remains that it is in consonance with the theory of Revenue that the amount more than 50 lacs was paid bv Smt. Purnima Beri to Shri Vijay Sehgal on the basis of agreement dated 29-4-1995. 22. The other relevant point is that in view of the rivalry going on in between different group of shareholders and competition to take over the effective control and management of the Company, none of the shareholder must be having confidence on the other group. In the case in hand, Shri Vijay Sehgal has executed power of attorney and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old the industries. This ground will not help the assessee. 25. On the basis of the aforesaid discussion and if summarised, then the factum of execution of two agreements, conduct of Smt. Purnima Beri at the time of search evading the questions relating to the transactions and later on admitting that Rs.2,000 were fixed as the price of each equity share and statements of Shri Yash Pal Mittal as well as Shri Vijay Sehgal at the time of search coupled with the recovery of approximately 50 lacs cash and unexplained investments in search on 13-12-1995 itself from Shri Vijay Schgal who allegedly received the cash and other circumstances, conclusion is that Rs. 60 lacs including amount of pavment made through cheques were actually transferred from Smt. Purnima Beri to Shri Vijay Sehgal based on agreement dated 29-4-1995 and addition is to be made to the extent of Rs.60 lacs - Rs.10,10,000 = Rs.49,90,000 in the hands of Smt. Purnima Beri and not Rs.90,93,600 made by the Assessing Officer and the Assessing Officer is directed accordingly. 26. The appeal of the assessee is partly allowed as addition will be Rs.49,90,000 instead of Rs.90,93,600. ORDER UNDER SECTION 255(4) OF THE INC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) Blank Share Transfer Deeds signed by Shri Vijay Sehgal and witnesses were also found and seized; (iv) Three receipts signed by Shri Vijay Sehgal testifying to the receipt of sums aggregating Rs.10,10,400 by cheques being the sale consideration of shares were also found and seized; and (v) Another agreement dated 1-5-1995 between the assessee and Shri Vijay Sehgal for sale of the ownership rights of shares inherited by the latter from his deceased father Shri D.D. Sehgal for a sum of Rs.7,46,400 was also found and this stated that the consideration of the said amount i.e., Rs.7,46,400 had been paid by cheque by the assessee to Shri Vijay Sehgal. 3. On being confronted with the aforesaid documents during the course of search, the assessee admitted the signatures on both the documents but explained that the sum of Rs.1,01,04,000 mentioned in the agreement dated 29-4-1995 took into account the compensation to Shri Vijay Sehgal for transferring the shares to the assessee to enable the "Beri Group" to have effective control over the affairs of the company M/s. Leader Valves Limited whereas in the subsequent agreement dated 1-5-1995 the price was mentioned at Rs. 200 per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share was a tentative one while the price of Rs.200 was the correct price and the difference between the two represented the compensation which was to be paid by the assessee to Shri Vijay Sehgal for assuming effective control by the "Beri Group" over the company M/s. Leader Valves Limited. Both the assessee and Shri Vijay Sehgal agreed and stated that the total sale consideration was Rs.1,01,04,000 but only a sum of Rs.10,10,400 was paid and the balance was still to be paid. 9. At the assessment stage, the statements of Shri Yash Paul Mittal and Shri Shital Vij were once again recorded on 14-10-1996 and they resiled from their earlier statements given at the time of search with regard to the payment of a sum of Rs.42 lakhs in cash to Shri Vijay Sehgal. 10. On the aforesaid facts the Assessing Officer arrived at the following conclusions:-- (i) The "Beri Group" desperately needed to raise its shareholding to acquire majority stake in the company; (ii) The genuineness of the agreement entered into between the parties had never been in doubt as the parties as also the witnesses had testified to the same; (iii) Payment of consideration to the extent of Rs.200 per sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) That search and seizure operations were carried out at the premises of the assessee and her husband as also Shri Vijay Sehgal along with two witnesses on the basis of a complaint/information with the Department that Shri Vijay Sehgal had sold his entire holding of shares of M/s. Leader Valves Limited to the "Beri Group" so as to enable them to assume effective control over the management of the company and that unrecorded cash amount over and above the sale price mentioned in the agreement had changed hands. (iii) The search party no doubt found two agreements of sale one dated 29-4-1995 and the other dated 1-5-1995 but parties to the agreement that is the assessee and Shri Vijay Sehgal both had admitted to the correctness of the agreements and had given reasons for the difference in the value of one share of the company mentioned in the agreement. (iv) That the price of Rs.2,000 per share in the agreement dated 29-4-1995 was tentative price and it included the amount which was agreed to be paid by the assessee to Shri Vijay Sehgal to compensate him for surrendering his ownership of shares so as to enable the "Beri Group" to increase their share holding to more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded by mutual consent and subsequently the assessee did make payment of the balance amount of Rs.90,93,600 by cheques extending over a period of more than a year. (xiii) That the entire payment of Rs.90,93,600 had been made by the assessee by cheques to Shri Vijay Sehgal by the end of September 1997 only. (xiv) There was no evidence available with the Department to indicate that the assessee had in fact paid cash to Shri Vijay Sehgal during the period 1-4-1995 to 13-12-1995 and the addition was based on mere suspicion and vague allegations that at the time of search at the residence of Shri Vijay Sehgal huge unaccounted cash, FDRs etc. were found. (xv) In case the source of cash and FDRs from the residence of Shri Vijay Sehgal was the money given by the assessee then Shri Vijay Sehgal could have explained it to be so and under these circumstances there could have been no addition on account of undisclosed income in the hands of Shri Vijay Sehgal. (xvi) That both the assessee and Shri Vijay Sehgal had stated that the price of Rs.1,01,04,000 represented the price for the transfer of the shareholding of Shri Vijay Sehgal inclusive of the shares, which were to be inherited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Mittal when his own statement was recorded at his business premises on 13-12-1995. 17. The learned AM then noticed the statements of both the aforesaid witnesses, which were recorded by the Assessing Officer during the course of assessment proceedings on 14-10-1996 when they resiled from their statements recorded on 13-12-1995. It was highlighted by the learned AM that in response to a particular question put by the Assessing Officer, these witnesses categorically stated that the information with regard to the passing of cash by the assessee to Shri Vijay Sehgal was based on hearsay and that cash was not paid in their presence. The relevant question and answer from the statement of Shri Y.P. Mittal recorded by the Assessing Officer on 14-10-1996 was thereafter reproduced in the order of the learned AM. The learned AM also proceeded to reproduce relevant extracts from the statement of Shri Shital Vij recorded by the Assessing Officer on 14-10-1996 vis-a-vis the retraction from the earlier statement and also confirming that no cash had been paid to Shri Vijay Sehgal by the assessee in his presence. 18. On the basis of aforesaid, the learned AM observed that addition was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red from the house of Shri Y.P. Mittal out of which the first agreement dated 29-4-1995 mentioned the sale consideration at Rs.2,000 per Equity Share i.e., Rs.1,01,04,000, which was to be paid by 30-12-1995 and the second agreement dated 1-5-1995 which mentioned a figure of Rs.200 per Equity Share. As noted in the order of the learned AM, the learned JM also took note of the revenue's stand that the difference between the two figures was paid in cash by the assessee to Shri Vijay Sehgal before the date of search and their being no dispute between the parties about the payment of Rs.10,10,400 by means of cheques prior to the date of search. 22. The learned JM referred to the conduct of the assessee vis-a-vis the preliminary statement recorded at the time of search i.e., on 13-12-1995 when she has purported to have evaded answers about the payment of consideration money of the Equity Shares and stated that her husband alone knew about this. She further denied knowledge about the extent of payment having been made whether in full or still outstanding but she categorically admitted that an agreement was signed between her and Shri Vijay Sehgal but these agreements were not found at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o him by the parties and he must therefore be taken as a privy to the transaction and developments thereafter. The learned JM at page 28 of the order reproduced the relevant extracts of the statements of Shri Y.P. Mittal and Shri Shital Vij to conclude that passing of Rs.60 lakhs including the amount paid by cheques between the parties was very much evident. He rejected the contention of the assessee's counsel about the recording of the statements behind the back or the assessee observing that even during the assessment proceedings these two witnesses were examined by the Assessing Officer in the presence of the assessee, who was thereafter given an opportunity to cross-examine them. 26. The learned JM thereafter came to the subsequent statements recorded whereby the witnesses resiled from the earlier statement and relevant extracts from the statement of Shri Y.P. Mittal are reproduced at pages 29 and 30 of the order of the learned JM. 27. At page 30 of his order, the learned JM discussed at some length the effect of the initial statement recorded at the time of search and the subsequent retraction. According to the learned JM, the statements recorded at the time of search wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d version as a result of manoeuvering on the part of the assessee and Shri Vijay Sehgal. 30. It was also noted by the learned JM during the simultaneous raid conducted at the house of Shri Vijay Sehgal that substantial cash and investments were found and these approximately exceeded Rs. 50 lakhs. According to him, the assessment order of Shri Vijay Sehgal showed that most of these were treated as unexplained investments made by Shri Vijay Sehgal during the period beginning with the date of agreement and ending with the search. The view of the learned. JM was that the Assessing Officer had rightly observed that there was a nexus between the payment of the substantial amount by the assessee in cash to Shri Vijay Sehgal and the recovery of more or less the same amount in the form of cash and unexplained investments from Shri Vijay Sehgal. 31. The learned JM further observed that Shri Vijay Sehgal had executed Power of Attorney and also signed blank share transfer deeds, which were recovered at the time of search and he could not be such a novice that without recovering the entire payment he would sign the aforesaid papers. This according to him was a circumstance going against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Bench. The following were highlighted:-- (1) Out of the total number of shares i.e., 5032, 1800 shares which belonged to Shri Vijay Sehgal had been transferred to the assessee prior to the date of raid whereas the remaining 3232 shares, which were the subject matter of succession proceedings before the Hon'ble High Court came to be transferred only in 1996. (2) The price of each equity share if worked out on the basis of the balance sheet of the Company was Rs.200 and this was not in dispute between the parties. (3) Simultaneous raids had taken place at eight locations and vis-a vis the assessee no incriminating documents were found and nor was the seizure of any asset made. (4) All documents which were the subject matter of the addition were found at the residence of Shri Y.P. Mittal. (5) No receipts/documents were found at any place, which would show that anything over and above Rs.200 per share had been paid. (6) There was cogent evidence on record to show that payment at the rate of Rs.2,000 had been made after the date of raid. (7) Vis-a-vis the transfer deeds found during the course of raid, it was pointed out that these bore the date of stamping as 21- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Shri Vijay Sehgal. This was also not possible because the assessee considering her past assessments showing nominal income could not be expected to be in possession of funds to the tune of Rs.90 lakhs and odd. (18) When it was the case of the Department itself that there was no trust between any of the parties to the transaction, then how could it be said or held, with certainty that assessee would make payment of Rs.90 lakhs and odd without any receipt or without the transfer to her name of 3732 shares, which were the subject matter of succession proceedings. (19) The action of the Assessing Officer in making the huge addition was entirely on probability, surmises, conjectures and suspicion when there was clear evidence available on record. (20) The Department had not brought anything on record which would show that the sum of Rs.90 lakhs and odd paid to Shri Vijay Sehgal after the raid and that also by cheque had come back to the assessee by any manner or mode. (21) That suspicion however strong could not replace evidence and in proceedings under section 158BD, there could be no presumption since such assessments had to be based on material evidence found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly supported the order passed by the learned JM and subsequent arguments advanced by him were a reiteration of the reasons recorded by the learned JM in confirming the addition to the tune of Rs.49,90,000. The following were highlighted:-- (a) The conduct of the assessee was not bona fide since she did not give direct reply to any of the questions asked at the time of search. (b) There were two agreements one mentioning a figure of Rs.200 per share and the other mentioning a figure of Rs.2,000 per share and these agreements were signed by the two witnesses who were the close confidants of the assessee. (c) The two witnesses in having their statements recorded mentioned specific dates and amounts in respect of the money paid in cash by the assessee to Shri Vijay Sehgal and subsequent statements resiling from the said stand were not valid in the eyes of law. (d) The two witnesses were responsible persons and it had to be seen in this respect as to why they should make initial statements about a particular state of affairs and which were subsequently resiled. That resiling was done under the influence of the assessee. (e) Shri Vijay Sehgal did not have any substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bros. v. CIT [1959] 37 ITR 271 (SC). 42. I have considered the rival submissions and also perused the separate orders passed by the learned Members constituting the Division Bench. The decisions cited at the par have also been considered. 43. As rightly observed by the learned AM, the main basis for the addition on the part of the Assessing Officer were the statements of Shri Y.P. Mittal and Shri Shital Vij recorded on 13-12-1995 i.e., the date of search. Subsequently, however, they were resiled from at the assessment stage. The position of law is absolutely clear on the resiling by a witness from an earlier statement i.e., it has to be for good reason. In the second statement, both the witnesses categorically stated that they were not witness to any money being paid in cash over and above the cheque payment aggregating Rs.10 lakhs and odd. Both of them accepted that what they had stated at the time of search was based on hearsay. There is also the mention of consultations between the two witnesses on 13-12-1995 probably on phone before making a statement before the Assessing Officer. 44. On the aforesaid facts it clearly emerges that Shri Y.P. Mittal and Shri Shital Vij w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or the other of the premises searched including those of the witnesses or even Shri Vijay Sehgal but nothing was found. 51. Another valid agreement raised before me and which is a plausible one, is that in case the assets found during the search at Vijay Sehgal's premises were related to the alleged cash payment made for the shares then this should have been categorically stated so by Shri Vijay Sehgal and he should have sought to assail the proposed addition in his hands on this ground itself. 52. It must be emphasised that in a case of the present type a single fact by itself or some of them may raise a doubt and a possible inference against an assessee but then it is necessary to consider/examine all the facts together and than reach a conclusion. Unless there is a cogent evidence with the Department and this is a search case to which Chapter XIV-B applies, no addition can be made on surmises, conjectures and suspicion ignoring in the process the evidence on record in favour of the assessee or the lack of evidence to support the revenue's case. The Department lays much stress on the two agreements and the statements of the two witnesses but the important aspect is that n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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